Understand the Protocol
Everything you need to know about "Coordinomics", the novel game-theoretical system powering the Rook Protocol.
A simplified diagram showing the flow of the ROOK token in the Coordinomics flywheel.
The Rook Protocol is the first protocol that allows generalized MEV to be internalized at the application layer. This protects users and protocols from negative externalities, reduces the total MEV available at the consensus layer, and ensures that less value overall is being extracted from markets and protocols by miners and validators.
A key property of the Rook Protocol is that it is community-owned, governed by a DAO, and tuned to favor an open optimum that pushes the most benefit back up to protocols, applications, and users, rather than becoming a profit-maximizing black box that could harm the integrity of the network.
Application-layer MEV represents a resource that could easily be exploited in ways that harm the guarantees users and builders of decentralized systems currently enjoy. This would create an environment which is hostile to innovation and progress: an even darker forest than the one we have today.
We don't want that to happen. This is why we've taken great care to design a comprehensive system that can flexibly capture a wide variety of application-layer transaction flow, and create a positive-feedback flywheel that aggregates and re-distributes MEV among participants in a way that increases overall network and market efficiency.
The xROOK token allows owners of ROOK to stake it for ownership of revenues that accrue to the Rook Protocol through the discovery of MEV and the profitable execution of transactions.
The Rook Protocol is a step-by-step protocol that anyone with a basic knowledge of blockchain and MEV can understand.
- 1.Keepers buy ROOK and stake it in the Coordinator smart contract. Keepers will spend this staked ROOK bidding on the right to execute transactions in the Rook Protocol.
- 2.Keepers watch incoming transactions, and continually search for the best way to profitably execute them. They use their access to all on-chain and off-chain liquidity, along with the unique access of the Coordination Network, to find the optimal way to execute.
- 3.When an opportunity is discovered, Keepers initiate a sub-second just-in-time auction that will decide who gets the right-of-way to execute the transaction. In the auction, Keepers place bids using their staked ROOK from (1).
- 4.The Coordinator Auction Module prevents Keepers from grim triggering eachother during the auction, by balancing both upward and downward bid pressure to discover the fair value of the profit opportunity.
- 5.The Coordinator greenlights the winner of the auction, leaving them free to broadcast the transaction and collect the profit they discovered, while fulfilling the request of the user who originated the transaction.
- 6.Upon execution of the transaction, the bid that the winning Keeper paid to win the auction is distributed based on the image in the ROOK bid distribution section below.
The value captured within the ecosystem can scale with the volume of orders going through it.
Value flows from users and market makers, through keepers, and leads to ROOK deflation through burning, ROOK demand from keepers needing to bid, and APY for ROOK stakers.
The more volume passes through the ecosystem, the more ROOK demand there will be from keepers, and the more ROOK will be acquired and staked. The higher the returns in the ROOK staking pool, the more ROOK will be acquired on the open market and staked for yield. The more ROOK is burned, the more scarce ROOK becomes.
The Rook Protocol's success scenario has a wicked upward value spiral.
The value captured through the ecosystem is divided up and distributed to the various participants involved. The users and market makers will receive the lion's share of the value since they are users of the products and the originators of the value.
For example, say that in a certain period of time, a total of 1,000 ROOK goes through the ecosystem. 800 ROOK will be re-distributed back to the users & market makers whose actions were facilitated. 100 ROOK is dropped on the Liquidity Pool owned by xROOK holders (stakers of ROOK). This equates to yield generation for those holding xROOK. 40 ROOK is burned, decreasing the total supply of ROOK in circulation. And 60 ROOK is returned to the Rook Treasury, where it can be allocated for a wide variety of purposes including contributor compensation, server and operational costs, and strategic opportunities.
The Rook Protocol creates continuous demand for the ROOK token from Keepers
Keepers must acquire ROOK and stake it in the Rook Protocol staking contract in order to participate in greenlight auctions. Once staked, a Keeper's ROOK is recognized by the Coordinator's payment channel and becomes available for the Keeper to bid to capture profit opportunities completely free from gas auctions. The staked ROOK can be withdrawn at any time by the Keeper. As the Keeper wins auctions, they will spend down their staked ROOK until eventually, they will need to reload. At that point, the Keeper will need to purchase more ROOK at market and stake it in the staking contract. A Keeper can reload as often as they like.
ROOK token holders can stake their ROOK in the Rook Staking Pool, receiving xROOK in exchange. A % of the value captured in every bid goes directly to xROOK holders giving them a yield that directly corresponds to the utility and success of the Rook Protocol. Our use of the Liquidity Pool in this way is a short and medium-term solution that solves the immediate use cases. During the year 2022, we will be preparing a custom staking contract solution that provides more advanced features to ROOK token holders.
Staking opens the door for Rook DAO Governance to refer to a user's xROOK balance when determining eligibility for features like voting and objection. This enables xROOK holders to gain the simultaneous benefits of yield generation and governance participation.
Keepers utilize the ROOK token to capture value efficiently while providing fundamental infrastructure for Rook and its users. Initial utility for token holders will involve the xROOK token and its role in governance. xROOK also opens the door for future benefits and use cases. More on this will be discussed during the year 2022 as we prepare our custom staking contract solution. Please direct these discussions to our Discord.
A % of the value captured in every ROOK bid is burned. This transitions ROOK towards becoming a deflationary asset.
A market maker who integrates with Rook immediately gains an integration to all of DeFi and CeFi through the Keepers. Market makers are backstopped by all Keepers while capturing spreads and hedging order flow. So market makers can capture their usual trading profits all while getting rewarded in ROOK for their MEV capture. All this, and they don't have to do any of the hard work (Keepers do it for them).
All rewards (users and market makers) are claimable via the Rook Protocol staking contract. The Coordinator collects bids from Keepers and opens up a payment channel to the user who can claim anytime they'd like.